US Dollar Still the Favorite for the Chinese

China’s holding of US Treasuries may have come down recently, but it is in no way indicative of a shift in the Chinese foreign currency preferences. With more than 70% of its total reserves denominated in the greenback, it would be detrimental for China to attempt to shift to Euro.

Also, the news emanating from the Eurozone is hardly inspiring. The latest move by China can only be seen as a diversification of portfolio. With the US economy coming back to its growing ways, China is more likely to repose faith in the Dollar than try to diversify into the Euro.